Five things that’ll take your credit score from good to excellent

A good credit score can open doors to various financial opportunities, but an excellent credit score can unlock even more. For financially savvy individuals and those aiming to elevate their financial status, understanding the nuances between good and excellent credit is crucial. 

Whether you’re working on increasing your financial pot or are already in the higher-income bracket, taking your credit score to the next level can provide significant advantages. In this article, we share our tips on how you can optimize your credit score.

Understanding the difference between a good and excellent credit score

A very good credit score typically ranges from 740-799, indicating that a borrower has a reliable history of managing credit responsibly – this range can vary depending on the credit scoring model used. However, an excellent credit score, which falls between 800-850 in the US, signifies exceptional credit management and financial discipline. 

While both good and excellent scores can qualify individuals for loans and credit cards, those with excellent scores often enjoy superior benefits, such as lower interest rates, higher credit limits, and a wider array of financial opportunities. Understanding this distinction can motivate individuals to strive for the highest possible credit rating, thereby enhancing their financial well-being and access to premium financial products.

1. Regularly monitor your credit report

Why it matters:

Monitoring your credit report helps you spot errors or fraudulent activities that could negatively impact your score. The sooner you identify discrepancies, the quicker you can address them.

How to do it:

    • Annual reports: Request a free credit report annually from the three major credit bureaus – Equifax, Experian, and TransUnion.
    • Review for errors: Look for inconsistencies and report errors promptly to ensure your credit history is accurate.
  • Raise any concerns to your credit bureau. If something doesn’t quite seem right, then make sure to raise it. Either they’ll be able to provide more information, or if there is an error, get the issue resolved and removed from your report.

2. Optimize your credit utilization ratio

Why it matters:

Your credit utilization ratio (otherwise known as your credit utilization rate) is the proportion of your credit card balances relative to your credit limits. It’s calculated by dividing the amount of credit you’re using by the total limit you have available, and lowering this ratio can significantly boost your score.

How to do it:

  • Keep balances low: Aim to keep your credit card balances below 30% of your total credit limit.
  • Request higher limits: Ask for an increase in your credit limit to improve your utilization ratio, but avoid increasing your spending.
  • Pay off balances: Regularly pay off your balances to maintain a low utilization ratio.

3. Maintain a mix of credit types

Why it matters:

Lenders like to see a variety of credit types, such as credit cards, mortgages, and automotive loans. This demonstrates your ability to manage different kinds of credit responsibly.

How to do it:

  • Diversify your accounts: Ensure you have a mix of revolving credit (credit cards) and installment loans (personal loans, mortgages).
  • Strategic applications: Apply for new types of credit only when necessary and ensure you can manage the new debt responsibly.

4. Build a long credit history

Why it matters:

The length of your credit history accounts for a significant portion of your credit score. A longer credit history demonstrates your experience in managing credit over time, and therefore means companies will be more confident when it comes to offering you better rates or products.

How to do it:

  • Keep old accounts open: Maintain your oldest credit accounts to lengthen your credit history.
  • Use accounts responsibly: Even if you don’t frequently use older accounts, occasionally make small purchases to keep them active.
  • Avoid frequent new accounts: Minimize opening new credit accounts unless necessary, as this can shorten the average age of your credit history.

5. Make timely payments

Why it matters:

Payment history is the most significant factor in your credit score. Consistently making on-time payments establishes you as a reliable borrower.

How to do it:

  • Set up reminders: Use calendar alerts or set up automatic payments to avoid missing due dates.
  • Prioritize bills: Make bill payments a financial priority, paying at least the minimum due if full payments aren’t possible.
  • Handle missed payments: If you miss a payment, make it as soon as possible and contact your creditor to discuss options for minimizing the impact on your credit score.

Solidify your financial future

Elevating your credit score from good to excellent requires dedication, strategic planning, and consistent financial habits. By keeping a close eye on your credit report to challenge inconsistencies, and optimizing your lines of credit, you’ll stand the best chance of reaching this top result. Furthermore, with these strategies, you’ll not only improve your financial health but also unlock new opportunities for wealth building and financial independence.

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